Senate passes overhaul of Alaska oil tax structure

Sen. Peter Micciche, R-Soldotna, introduces the first amendment to Senate Bill 21, which institutes oil-tax cuts for industry. The amendment, backed by nine other senators, eliminates one provision of the bill that opponents had attacked: a reduction from 35 percent to 33 percent in the tax on oil after three years. If passed, the amendment would result in hundreds of millions of dollars more in tax collections over the next decade.
Richard Mauer
Sen. Hollis French, left, and Sen. Bert Stedman, talk during a break Wednesday on debate over an amendment by French to reintroduce a progressive tax on oil. The amendment failed, 4-16. Stedman, who supports progressive taxation, said he thought French’s tax rate would be applied in such a way that it could cost the treasury in the future if natural gas from the North Slope is marketed.
Richard Mauer
Sen. Peter Micciche, R-Soldotna, introduces the first amendment to Senate Bill 21, which institutes oil-tax cuts for industry. The amendment, backed by nine other senators, eliminates one provision of the bill that opponents had attacked: a reduction from 35 percent to 33 percent in the tax on oil after three years. If passed, the amendment would result in hundreds of millions of dollars more in tax collections over the next decade.
Richard Mauer

NOTE: AN UPDATED VERSION OF THIS STORY IS POSTED HERE.

Update: 9:20 p.m. Wednesday:

From the Associated Press --

A divided state Senate late Wednesday passed an overhaul of Alaska's oil tax structure, amid fears it will blow a hole in the state budget and give too much to oil companies with no guarantees. 

"This may not work," Sen. Gary Stevens, R-Kodiak, said of the bill. "I hope it does, but it may not work." 

Supporters say SB21 will make Alaska more competitive for additional investment dollars and should lead to new oil production. Alaska relies heavily on oil revenues to run, and production has been on a downward trend since the late 1980s. Higher prices in recent years have helped to mask the impact of the decline. 

The bill passed 11-9, after hours of start-and-stop debate, with minority Sens. Johnny Ellis, Berta Gardner, Bill Wielechowski, Hollis French and Lyman Hoffman and majority Sens. Donny Olson, Dennis Egan, Bert Stedman and Stevens voting against it. Reconsideration was served, meaning the bill could be voted on again before going to the House.

Update: 5 p.m. Wednesday:

From Richard Mauer in Juneau --

The Senate got through seven amendments to the oil-tax bill in a marathon floor session Wednesday afternoon. One, designed to pull in reluctant Republicans, narrowly passed; one to create a sunset clause narrowly failed; and the rest, all proposed to Democrats to insert portions of the current tax law into the new bill, lost be large margins.

Senate President Charlie Huggins called a recess in the proceedings at 4 p.m. to allow Senators to grab a bite to eat and for at least one committee to clean up business. It was to resume about 5:15 with more amendments and a possible final vote on the bill.

The winning amendment, presented by Sen. Peter Micciche, R-Soldotna, eliminated an even steeper reduction in oil taxes by canceling a decline in the tax rate from 35 percent to 33 percent in three years.

Micciche's presentation of the bill, begun before lunch, was interrupted when Democrat Hollis French, an attorney, noticed a drafting error. Huggins ordered a break for lunch. When senators returned after lunch, Micciche had a new version with the problem fixed.

The amendment passed 11-9, a possible foreshadowing of the final vote on the bill, so far set for late Wednesday. Two Republicans, Gary Stevens of Kodiak and Bert Stedman of Sitka, voted with the seven Senate Democrats against the amendment.

Stevens asked the Senate to approve a sunset clause, with the bill expiring Jan. 1, 2017, if the Legislature finds that oil companies have not taken advantage of reduced taxes by producing more oil in Alaska. The amendment failed, 9-11, with the same blocs as Micciche's amendment.

The other five amendments failed by much larger margins, with not even all Democrats supporting them. Sen. Hollis French, D-Anchorage, tried to bring back a progressive tax where the rate rises as oil prices climb. It failed, 16-4, with the four Democrats from Anchorage being the only supporters: French, Bill Wielechowski, Berta Gardner and Johnny Ellis.

French then tried again with a bill that would impose the progressive tax only on the "legacy fields" of Prudhoe Bay, Kuparuk and Alpine. It failed 15-5, gaining the vote of one more Democrat, Lyman Hoffman of Bethel.

Wielechowski offered another progressive tax bill, this one applying to the entire North Slope but cutting the tax from the current rate. It lost with the same vote as the previous amendment, 5-15.

Two other Democratic amendments, designed to reduce the affect on the state treasury, also failed by similar margins.

This is a developing story. Check back for updates.

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Original story:

From Richard Mauer in Juneau --

The oil-tax bill continued its fitful journey in the Alaska Senate on Wednesday morning in an on-again, off-again session that finally got hung up on a technicality: The bill's first amendment apparently failed to match up with another section of state law.

After gaveling the session to order around 11 a.m., Senate President Charlie Huggins called a recess until 1:30 p.m. for the issue to be resolved.

Senate Bill 21, introduced by Gov. Sean Parnell, cuts about a billion dollars a year from oil taxes in an effort to attract more industry investment. Amendment 1, offered by Sen. Peter Micciche, R-Soldotna, would restore a couple hundred million, more or less, from the version of the bill passed by the Senate Finance Committee.

Just as on the first day of the bill's appearance on the floor Tuesday, when the Senate finally adopted the Finance Committee version, the Wednesday session was frequently interrupted by calls of "at ease" by Huggins for one issue or another. Micciche's introduction of the amendment required two at-ease calls before he finally made it official.

"Sen. Micciche?" intoned Huggins after the second at-ease.

"Just four words, Mr. President," he said. "I move Amendment Number One."

His challenged counting aside, the amendment had the names of 10 senators, half the body, and will play a role in attempts to win the support of several reluctant Republican senators, including Click Bishop of Fairbanks and Mike Dunleavy of Wasilla. It might also be a sign from the Senate to the House, which will get the bill if it passes the Senate, about the location of its "bright line" should the House be in the mood to give more money back to the oil industry. If the House changes the bill, it would have to go back to the Senate for reconciliation, and the amendment appeared to indicate the majority's bottom line.

Micciche said that without the amendment, the state would be giving too much back to industry. Speaking in support of his amendment, he said his target was to put Alaska's total "take" fractionally below the global average among petroleum producers and above the average of the 38 member nations of the Organization for Economic Cooperation and Development.

While another goal of Senate Bill 21 was to eliminate what he called "punitive progressivity" in the current tax law, under which the tax rate rises as prices rise, the amendment also introduces an element of a progressive tax, though slight, he said.

But Sen. Hollis French, D-Anchorage, said from the floor that he noticed the amendment failed to consider how it affected another aspect of tax law involving the way operating losses are carried forward. Another "at ease" followed as senators rushed to consult with aides and administration officials. A short time later, Huggins called a halt to proceedings.

 

Reach Richard Mauer at rmauer@adn.com or in Juneau at (907) 500-7388.

 

 



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